I asked almost this same question a few weeks ago here:

https://news.ycombinator.com/item?id=45628186

But the one thing that doesn’t compute is the commitment. There is a long term obligation now incurred by meta to use this infrastructure. If it’s a capital lease I assume this is now a liability on their books (and disclosures)?

Fade-Dance had a fairly reasonable answer to it:

Maybe they don't want to securitize their core assets and introduce a new favored class of investor. Ex: If they are securitizing their AI data centers as part of the initial capital raise, those investors would be higher up the capital stack. They would get the datacenter in a theoretical bankruptcy before the bond/equity holders got their cut of the liquidation. Intel securitized their new fab builds with Brookfield and Apollo and, as a shareholder at the time, it didn't feel great. No idea what the precedent is regarding Meta by the way, just a thought. Maybe they think that the lenders are a bit "overzealous", and they want to push the risk of things like write down on GPU racks entirely onto external parties who are apparently all too happy to take the risk. I'm guessing it's a mix of both, combined with the fact that we're seeing some copy and paste thinking. This is proving to be a way to get fast access to the huge private credit market. I would assume there must be some very wide deal flow pipes cranking currently, so why not tap into them if the demand is there in the other end.

I think it’s naive to focus on “what is meta getting” from Beignet.

As an example to stimulate your imagination, Walmart has settled as recently as 2019 to resolve liability due to weak internal controls that allowed “third party affiliates” to bribe local officials and others in various ways.

If the llc declares bankruptcy does meta have to pay the bank for it - or can they buy the assets at fire sale prices?

A lot of comments praising this summary, but I'll criticize it: it's still too verbose, and misses the point.

Meta wants to fund this project, but doesn't want the debt on own its books (because it would impact its vanity AA credit rating). Debt investors are happy to finance a special purpose vehicle guaranteed (in a non debt way) by Meta at a credit rating almost as good as Meta's (say, A). No one is confused this is Meta getting financing for their own project; they've just put it in a wrapper for vanity credit score reasons.

Levine wrote about it and his writing is better than ChatGPT, this snarky website, and obviously mine: https://www.bloomberg.com/opinion/newsletters/2025-10-29/put... .

I don't get why Beignet doesn't also hire Meta and pay it to build the DC.

Thank you, I actually understand what this is all about now.

This is hilarious because I was at the Louisiana public utility commission meeting where the argument was basically it’s Meta borrowing the money so they’re good for it.

reading is really hard. I'm so happy ChatGPT exists

They can get a better interest rate by using a specialty data center lender.

wow, what a great summary.

Very useful, ty

Is Meta actually obligated to repay the loans or not?

That’s how you can decide if this is disingenuous or not. If Meta is obligated to repay the loan and used to synthetic means to get it off the balance sheet that’s a problem.

If they have in fact successfully transferred risk to other parties then that’s what deals like this are for. It’s the whole reason the concept of limited liability exists.

I am fully willing to believe it’s the former. But that’s the test.

"None of this is unusual except for the part where Meta designs, builds, guarantees, operates, funds the overruns, pays the rent, and does not consolidate it."

So ChatGPT put this sentence in list form and reordered it a bit. AGI is imminent!

This might be the first time an explicit ChatGPT response survived being the top comment

I personally think it’s a great response and makes it clearer what’s happening

Times are changing quickly!

If the article is correct and they are 144A then they will also be a little less liquid. But yeah, I have to imagine everyone involved knows what’s up. Just happens to work for everyone (for now).

The 2008 crash was in part caused by inaccurately rating synthetic bundles of subprime mortgage debt as extremely low risk (e.g. AAA). Subprime borrowers had a much higher risk of defaulting than a AAA rating implied.

On the other hand, Meta has great creditworthiness. And guarantees this vehicle. So... it's not the same.

Does it need to be a secret to be noteworthy, especially if it’s apparently working despite not being a secret anymore?

> Or does this financing include provisions to pay the electricity bills for the next ten years which, in turn, gets used by the power company to finance the construction of a new power plant? The power company gets some kind of heads up?

Mostly things like this, yeah. The hyperscalers don't want to get into the power business.

Of course not. We're eating roast beast. (I'm saying that the entire endeavor is a fairy tale that we're misguidedly bringing into live-action.)

> One-Third-Gorges Dam (one tenth of the Three Gorges Dam.)

Pedantically, that's one ninth of the Three Gorges Dam. One tenth would be the 0.3 Gorges Dam.

Meta's accounting games are entirely reminiscent of Enron, who famously named their off-balance sheet debt-hiding special purpose vehicles after Star Wars "Jedi 1, Jedi 2," Jurassic Park, "Raptors 1 through 7," and the crooked CFO's kids "LJM" etc.

"A Love Letter to Enron" would sound really bad in the deposition.

It’s a fitting name for Louisiana at least. But this place is next Monroe which is…nowhere near New Orleans.

This entire thing was a masterpiece I love it.

The crux of this article is that they won't treat Meta's debt as debt, because Meta intentionally structured this debt to circumvent the agencies' definition of "debt." Should they change their definition of "debt?" Maybe, but what incentive do they have to do that, is any formal definition bulletproof to circumvention, etc.

What's very interesting to me is what happens when Meta doesn't exercise those lease options. If there isn't some kind of penalty for declining the option, well...

As in the 2008 crash, the ratings agencies were disincentivized to accurately rate these vehicles because they were superficially masked and paid by the companies asking them for ratings.

You would guess right, and I have even heard that this sort thing has been standard practice for a long time, without nefarious intent.

The problem is that even standard practice, without nefarious intent, can cause massive financial collapse. If, say, the vast majority of economic growth were being focused into such vehicles, the lack of transparency could make people misanalyze the situation and result in bad valuations that collapse when it all becomes transparent.

Right.

> I should say that the big tech companies did not invent this technology to build AI data centers. This sort of thing — project finance, non-consolidated joint ventures, borrowing out of boxes — has a long history in a lot of capital-intensive industries.

Levine attributes a recent increase to private credit.

https://www.bloomberg.com/opinion/newsletters/2025-10-29/put...

Yeah, it's very dumb to own real estate like this directly for a c-corp

This article is poorly written. It’s so desperate to be clever and edgy that it’s hard to get the facts out of it.

ChatGPT isn’t really a solution because the source is both low quality and has questionable motives. Going to any of the other good articles on the subject that have been linked in this comment section is much better.

It is not the reader's fault if the article is unreadable in the first place.

Not to mention that asking help to explain a text is extremely common. I can read English, but I have never read a US supreme court ruling. There are much better ways for me to understand those rulings to me as a non-lawyer.

The difficulty understanding this piece comes from lack of knowledge about finance and ratings, not from an inability to read. The blog assumes a large amount of financial knowledge which is not common among the HN audience.

It is so hopelessly depressing. I was wrapt reading it from start to finish and thoroughly enjoyed it as few recent articles at length have been.

And then going to the comments, excitedly no less, to find…this?

Jfc :’(

No, the capital comes from someone else. IIUC, private credit.

A couple thousand of them in the US https://carta.com/data/spv-spotlight-q3-2024/

MBAs gotta have something to do.

Setting up a separate company for a major construction project is so common that it would be surprising to hear someone didn’t do it. The structure of the OP makes it hard to understand if there’s some more specific aspect he’s objecting to.

About as common as breathing.

They continue to spend $4B/quarter on this as of 2025Q3 financials.

What's your point with this comment? How can we ever hope for another Bell Labs if we decry companies taking risks on things no one even asked for?